The New Zealand dollar rose for a seventh straight session on better-than-expected domestic economic growth, while a report that China is set to cut tariff rates on imports from the majority of its trading partners as soon as next month also bolstered risk sentiment and the currency.
The kiwi climbed to 66.85 US cents as at 9am in Wellington from 66.45 cents yesterday.
A Statistics New Zealand report yesterday showed that gross domestic product grew 1 percent in the June quarter and expanded 2.8 percent for the year, surpassing economists’ expectations on both counts and drastically reducing bets the central bank might soon cut interest rates.
“The strong Q2 GDP figures have altered the domestic economic narrative for the NZD for now, although better global risk sentiment is assisting too,” ANZ Research economist Miles Workman and senior macro strategist Philip Borkin said in a note.
Bolstering appetite for riskier investments including the kiwi was a Bloomberg report, citing two people familiar with the matter, that China is planning to cut average tariff rates on imports from the majority of its trading partners as soon as next month. The two people asked not to be named because the matter isn’t public yet, according to Bloomberg.
“This is a move that should not only prop up Chinese domestic consumption (in the face of rising import prices) but could also offset some of the negative global demand impacts of the US trade war,” Workman and Borkin noted.
Premier Li Keqiang said Wednesday that China would reduce tariffs, though he didn’t elaborate; US President Donald Trump earlier this week escalated the trade war between the two nations by slapping additional tariffs on Chinese goods.
“Details are lacking at present so it’s anybody’s guess how this might directly impact New Zealand exports (or how imports from the US will be treated for that matter), but even if key New Zealand exports don’t make the list, there are still indirect benefits to be had through higher-than-otherwise Chinese disposable incomes,” according to Workman and Borkin.
The kiwi strengthened to 91.62 Australian cents from 91.50 cents and rose to 77.17 yen from 74.54 yen yesterday. It slipped to 50.37 British pence from 50.52 pence and weakened to 56.74 euro cents from 56.91 cents yesterday. It advanced to 4.5748 yuan from 4.5516 yuan. The trade-weighted index was at 72.23 from 71.98 yesterday.
“The NZD has pushed through topside resistance and has a bit of momentum here,” according to Workman and Borkin. “We retain a medium-term bearish bias, but don’t think now is the time to fade this move just yet.”